Which of the Following Statements Regarding "Taxation of Dividends and Capital

question 13

Multiple Choice

Which of the following statements regarding "taxation of dividends and capital gains under current tax law" is incorrect (assuming that the marginal tax rate for a large corporation is 35%) ?

• A) For-profit corporations have a tax reason to prefer dividends.
• B) Corporations pay corporate income tax on only 30% of any dividends received.
• C) The effective tax rate on dividends received by large corporations is 35% of the marginal corporate tax rate.
• D) Corporations have to pay a 35% tax on the full amount of any realized capital gain.

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Definitions:

Nongovernmental Organizations

Independent organizations not affiliated with governments, often focused on humanitarian, environmental, or social causes.

World Trade Organization

An international organization designed to supervise and liberalize international trade by providing a framework for negotiating trade agreements.

North American Free Trade Act (NAFTA)

An agreement among the United States, Canada, and Mexico designed to remove tariff barriers and facilitate the cross-border movement of goods and services.

Tariffs

Tariffs are taxes imposed by a government on imported or exported goods, typically used to regulate trade, protect domestic industries, or generate revenue.